Assuming capital and labor are substitutes,an improvement in technology that affects only the productivity of capital would cause a firm to employ more capital but leave the amount of labor employed unchanged.

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Quizplus · Accepted Answer

An improvement in technology that increases the productivity of capital makes capital more attractive to use, potentially leading to a substitution effect where firms use more capital in place of labor, thus potentially reducing the amount of labor employed.

Assuming Capital and Labor Are Substitutes,an Improvement in Technology That